‘Collective bill’ and the fate of SMEs

‘Collective bill’ and the fate of SMEs

EVER since the imposition of various fees on expatriate workers by the Ministry of Labor and Social Development, the country’s small and medium-sized enterprises (SMEs) are in a state of confusion on how to handle the precarious situation. They are anxious that the policy of the ministry will deal a big blow to their businesses and force most of these small enterprises to shut down and sack both Saudi and foreign workers because of their inability to pay the bill. The ministry’s decision to impose the “collective bill” and the dependent’s fee on expatriate workers was instrumental in producing negative impact on these businesses. There are mixed reactions on this move as they are appearing in the local newspapers and social networking sites as well as in the private gatherings of people.

The Okaz newspaper recently conducted a survey among a number of economists on the topic of the “collective bill” and its impact on the private sector. They were almost unanimous in their opinion that the imposition of the bill would harm the private sector and would result in the exit of SMEs from the market. They noted that it would also result in shooting up the cost of providing services in view of the fact that the amounts of “collective bill” are huge and they are quite unaffordable for SMEs. These economists suggested that the decision should be applied to only large enterprises.

Dr. Abdullah Al-Maghlouth, member of the National Committee for Contractors at the Council of Saudi Chambers, said that the “collective bill,” issued by the Ministry of Labor and Social Development, is detrimental to the economy. He pointed out that the SMEs are the most affected sector by this decision, especially those that work in the fields of providing services, because their employees are skilled in craftsmanship, while many Saudis have no experience and do not want to work in such businesses. He noted that this move would not bring about the desired objectives but would result in transforming small entrepreneurs and businessmen to jobseekers after shutting down their businesses.

Abdul Ghani Ansari, an economic analyst, said that the amounts of the “collective bill” are huge and small enterprises cannot afford it. Though these bills would help create jobs but would not be instrumental in eliminating unemployment rates. It will also result in ending the total economic diversity while taking into account of the fact that the Saudi economy hosts two million small enterprises that need support, banks for financing, and simplified procedures for their smooth operation. Hence, more time should be given to these small businesses before introducing such fees and there won’t be any restrictions on them in the light of the global economic recession.

On his part, Ahmad Al-Shahri, an economic analyst, said that the impact of the “collective bill” would be direct on small businesses and would lead to the exit of a large number of them from the market, and that would consequently result in an increase in prices for citizens. “However, at the strategic level, the decision would be instrumental in dispensing with the surplus labor from the market, as well as those involved in cover-up businesses (tasattur) in order to make personal earnings for them. Moreover, it would also rein in the volume of remittances sent by foreign workers to outside the Kingdom.”

Therefore, the Ministry of Labor must take into consideration the fate of the small businesses and establishments, and the ministry instead should turn its focus on big companies where large numbers of foreigners are working, to implement such a decision. He drew attention to the fact that the Kingdom’s move to impose levy on expatriate workers should have an economic goal rather than a financial one as perceived by some people. According to Al-Shahri, the flaws in the manpower market will be addressed only with such methodologies.

The observations of these economists pointed out that the Ministry of Labor did not take into account the negative aspects of the “collective bill” issue when it decided to impose fees on expatriate workers and thus it imposed the “collective bill,” of which the negative effects began to appear even before it came into force. It seems that the ministry wanted to create jobs for Saudis by replacing expatriate workers without taking into consideration of the fact that what are the sectors where Saudis can fully replace foreigners, and it did not examine which are the sectors where total Saudization is to be implemented in a phased manner.

It would be appropriate to start a training program for Saudis in areas where they are willing to work. There are certain areas in which Saudis won’t be ready to work despite of being given any sorts of temptations such as the fields of construction, cleaning and hair saloon. Also, there are some other areas where some Saudis may come forward to take up job but their number won’t exceed five percent of the actual number of required jobs. However, unfortunately, the ministry did not take into account these realities when it decided to impose these fees, especially dependent’s fee, the similar of which is not seen in any other country.

This will affect disproportionately those who are working in sectors where Saudis are not ready to take up jobs because of the lowest salary scale. We can hope that the efforts being made by the business community, represented by chambers of commerce and industry, as well as columnists, who shed light on the negative aspects of the imposition of these fees, would result in having a review of the decision by the concerned authorities.

— Dr. Ali Al-Ghamdi is a former Saudi diplomat who specializes in Southeast Asian affairs. He can be reached at algham@hotmail.com